Market Wise Update: August 2024
Transcript:
My name is Chip Kalousek. And I’m Zach Ivey with today’s Market Wise Update. So let’s get into it. Let’s just jump right into it. We actually recorded this video on Friday morning. And as they say, markets they can turn on a dime. And market sentiment has definitely shifted since we recorded that video. Markets are down a good bit since the end of July, anywhere from 5 to 10%. So we wanted to come to you kind of explain what’s been happening and what’s most important to keep top of mind. Yeah, Chip, it’s times like these that bring to focus that markets really trade on three things. They trade on fundamentals, on macroeconomic factors and on technicals. And at Savant we focus mostly on fundamentals which we still think are pretty strong. But in the short run these other factors can create a lot of volatility. And speaking about volatility, we know volatility is a perfectly normal part of investing. It’s a premium we pay to earn higher returns.
So the chart up on the screen looks at returns going all the way back to 1979. And these are actually annual calendar year returns shown in the teal bars. And you’ll notice number one that there’s a lot more positive annual returns than negative. But then around those teal bars you can see the black or red whiskers which show the largest intra-year gain and decline within each year. And even in years with high calendar year returns, we can have some large intra-year declines. That actually happens quite frequently, and on average we experience a 14% intra-year decline annually. And in addition to that, daily dips of 2% or more are normal as well. Those occur about eight times per year. So volatility is perfectly normal and should be expected.
Exactly. And if we look at performance here today the U.S. market is still up nearly 10%. And other indices are positive as well. Despite these 5 to 10% pullbacks that we’ve seen recently. Most importantly, when we zoom out, longer term markets have provided significant growth over inflation, which has allowed investors to fund their goals and objectives. So volatility really is the work that we do. It’s the price that we pay to get these returns. Well zooming out really definitely adds some good context there Zach, but what can investors control when they start to experience volatility like this. Well we believe it’s critical to have a financial and investment plan and to stick to it.
At Savant, we utilize an evidence-based approach to investing, which means we make our decisions are based on facts and not on emotion. We’ve learned that markets reward the patient and punish the impatient. So, understanding this volatility that you’ve been talking about is really key to keeping a level head. More great reminders, Zach. Key takeaway for everybody today. Volatility is normal. Zooming out can add some context, and that matters a lot too, but then focus on what you can control.
Never make important decisions based on emotion and buying high and selling low never works. If you have any additional questions or concerns about the market or your financial plan, please do not hesitate to reach out to your Savant advisor. We appreciate your time today and hope everybody has a great rest of your week. Take care.